British supermajor Shell has denied reports that it is in talks to acquire BP, a mega-takeover that would be worth more than $80 billion. If completed, the combined firm would be the second-largest publicly-traded energy firm, rivalling ExxonMobil.
In an exclusive published Wednesday, the Wall Street Journal reported that bankers for Shell and BP are in early talks about the terms of a possible megamerger. People close to the talks said that the conversation is active, and that investment bankers for both firms are involved in the discussion. The talks are proceeding slowly and cautiously, the WSJ reported, and the outcome is not yet certain.
Shell firmly denied the WSJ’s report, saying that “no talks are taking place.”
It is the second time in two months that the prospect of a Shell-BP merger has emerged in the press. In early May, Bloomberg reported that Shell was weighing up the pros and cons of acquiring BP, and was in conversation with advisors.
BP has not been as profitable as its supermajor peers in recent years, thanks in part to its now-canceled pivot to renewables. Under pressure from activist investors, it has been making big moves to get back to its roots in oil & gas. A sale could be one option to create extra value for its shareholders, in the form of an acquisition premium.
A Shell-BP merger could have meaning for the U.S. offshore sector. Both firms have a large footprint in the deepwater U.S. Gulf. Shell is the leader with 15 platforms in the region, including Perdido, the deepest floating platform in the world. BP has five platforms in the U.S. Gulf – Atlantis, Mad Dog, Na Kika, Thunder Horse and Argos – and is investing in a sixth, Kaskida. Their overlapping infrastructure and interests in the Gulf could provide a combined Shell-BP with valuable opportunities, according to analysts.